Nurun Retail Business Models Trend Report December 2012

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Created by my team and me at Nurun Toronto, this is the second of five trend reports that will inform a strategic foresight report on preparing for the future of retail in North America (to be …

Created by my team and me at Nurun Toronto, this is the second of five trend reports that will inform a strategic foresight report on preparing for the future of retail in North America (to be published in 2013).

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  • 1. TH E FUTURE RETAIL MAR ing of erchandis & M rt etingrend Repo BUSI Mark T t epor Tre nd R odel ess M or t Busin Tren d Rep VALU ange Exch Value odel e ss M rt Busirnnd Repo Te orms ogy Platf hnolend Repor t Tec Tr December 2012
  • 2. Business Models Trend Report | December 2012Executive SummaryBusiness models are no longer an invisible component of retail strategy. Changesin customer expectations and technology have spurred the development ofinnovative new business models that are shaping the future of retail. To helpretailers navigate these changes, Nurun has prepared a report that identifies anddescribes six key business model trends: 1 The conflicted consumer: Retailers are struggling to adapt to a world of opposing consumer tensions. 2 eCommerce converges with bricks-and-mortar (and vice-versa): Formerly separate business models are slowly amalgamating. 3 Vertical integration makes a comeback: Some of the most recent retail brands have embraced vertical integration from day one. 4 Affiliate marketing has its moment: A new wave of eCommerce built around affiliate marketing has emerged. 5 Paying for usage: Temporary ownership of cars, dresses and toys is growing in popularity. 6 Please subscribe: New automated subscription services are providing enhanced consumer convenience and product variety.Along with a thought-provoking look at each of these six trends, this reportcontains a series of provocative questions for each trend that will help retailersconsider how they might evolve their current business model. 2
  • 3. Business Models Trend Report | December 2012Manage the ambiguous futurewith strategic foresightDaily blog posts. Monthly magazines. Quarterly trend reports. Must-read books.Anyone who works at the intersection of technology and people is swimming in Steps of strategic foresightinformation. This data smog can make deciphering the implications of the latesttech and social developments difficult. One solution is strategic foresight, which 1 Trend scancan help you make sense of emerging trends and clearly evaluate your options forthe future. It’s a tool to manage risk when facing ambiguity in the marketplace. 2 Identify trend driversStrategic foresight doesn’t predict the future, but it does help prepare you for it 3 Evaluate critical uncertaintiesby envisioning a number of different, yet possible, future states in the market 4 Future scenarioslandscape 10+ years from now. These future states are often described as a setof scenarios, and they emerge from an analysis of current trends. So, as a simple 5 Strategic implicationsexample, the increasing popularity of pop-up retail spaces, combined with thehigh adoption of mobile devices, could develop into a future filled with transient 6 Action planstorefronts. This scenario would be made possible due to the minimal wired 7 Monitor trendsinfrastructure required for information and payment.The rapid uptake of technology means that our social lives, cultural experiences,policies, regulations, ecological landscape, and business models are increasinglyintertwined. Through its very design, strategic foresight is built to accommodatecomplexity by considering trends from a multi-dimensional perspective. 3
  • 4. Business Models Trend Report | December 2012Why Retail Foresight?The Nurun Toronto team has launched a strategic foresight initiative to articulatethe future of business-to-consumer (“B2C”) retail and commerce, and explore Steps of strategic foresightimplications for Canadian and U.S. retailers. The scenarios we generate will giveour retail clients the toolkit necessary to start imagining (and preparing for) the 1 Trend scanpossible futures in the marketplace. Marketing and MerchandisingThe first of seven steps in the strategic foresight process involves trend scanning. Business ModelsThe trends we capture will be published as a series of trend reports that focus onfive domains of importance to both online and omni-channel retailers. Value Exchange AnalyticsThis is the second of five trend reports, and it looks at retail through the lens ofbusiness models. Next will be a report on value exchange, followed by analytics Emerging Technology Platformsand emerging technology platforms. The culmination of trend scanning andsubsequent phases will inform future scenarios in our final strategic foresight 2 Identify trend driversreport. For more information, you can follow the project on Nurun’s blog,Digital for Real Life or subscribe to our email list, futureofretail@nurun.com 3 Evaluate critical uncertainties 4 Future scenarios 5 Strategic implications Preparing for the Future of Retail: A Strategic Foresight Report 6 Action plan 7 Monitor trends 4
  • 5. Business Models Trend Report | December 2012IntroductionFor many decades, business models were one of the most invisible aspects ofretail. But changes in consumer culture, customer expectations, market forcesand technology have spurred the development of new retail models. The resultingsuccess and influence of companies like Amazon and Apple on the traditionalretail landscape has resulted in considerable attention from consumers, media andretailers alike (Internet Retailer, 2012).Given the necessity of rethinking retail strategies in an era of innovative businessmodels, Nurun has prepared a report that identifies six key trends. As a startingpoint, Nurun used the definition provided by Alexander Osterwalder and YvesPigneur in their book Business Model Generation: “A business model describes therationale of how an organization creates, delivers and captures value. Building on ”this, we defined value along three dimensions:·· Customer (utility)·· Business (financial)·· Social (community impact)We also used Osterwalder’s business model canvas as a tool to help usunderstand the key components of various business models and relationshipsbetween the different building blocks during our trend scan.For many established retailers, a recent challenge has been to try and seamlesslyintegrate new business models with their existing retail approach. In the process,core aspects of traditional retail business models are being rethought, often out ofnecessity. New online revenue streams have added complexity to business modelsthat were originally designed to deal only with straightforward in-store retailtransactions. This means finding new ways to drive profit and stay competitive inan omni-channel environment.Changes in consumer expectations and behaviours will continue to drive theevolution of new retail models. As evidenced by The Conflicted Consumertrend, many retailers are still struggling to adapt to a world of opposing consumertensions, such as a desire for the benefits of both local and global retail.This confusion might be a necessary, but temporary aspect of the transformationof retail. The eCommerce converges with bricks-and-mortar (and vice-versa)trend suggests that two formerly separate retail business models are starting aslow and uneven process of amalgamation. ⊲ 5
  • 6. Business Models Trend Report | December 2012Just as with music or clothing, certain business models go in and out of fashion.The retail trend of Vertical integration makes a comeback demonstrates thatextending an existing business model into new parts of the value chain can giveit a new life. In other cases, new business models have been made possible bythe Internet, explaining the Affiliate marketing has its moment trend.Along with these larger shifts in retail business models, Paying for usage andPlease subscribe are two mini trends that we believe will persist over the longterm and are worth watching closely.This report offers a thought-provoking look at each of the six trends mentionedabove, along with a series of provocative questions that relate to each trend.A complete strategic foresight report that incorporates these six retailbusiness model trends, along with key retail trends relating to marketing andmerchandising, value exchange, analytics and emerging technology platforms,will be released in early 2013. (Our first trend report on Marketing andMerchandising is available here.) ■ Nurun Toronto found four major trends and two mini trends relating to retail business models: Major Trends 1 The conflicted consumer 2 eCommerce converges with bricks-and-mortar (and vice-versa) 3 Vertical integration makes a comeback 4 Affiliate marketing has its moment Mini Trends 5 Paying for usage 6 Please subscribe 6
  • 7. Business Models Trend Report | December 2012 1The conflicted consumerConsumer expectations for retailers continue to evolve due to a variety of social,economic and cultural factors. These factors include a greater degree of socialresponsibility, a pressing need for convenience and a new awareness of shoppinglocal in a global marketplace. In order to stay competitive and respond to newconsumer demands, some forward-thinking retailers have developed innovativenew business models.The result of this mutual influence is an ongoing dance between customerexpectations and new business models. This has helped to encourage the riseof the conflicted consumer, a development that has become more noticeable asstartups, boutiques and niche retailers populate the marketplace and highlightthese new consumer inclinations and points of tension.Everything vs. one thingConsumers appreciate the wide assortment and one-stop shop aspect of the“everything for sale” approach made popular by Walmart. At the same time, theyalso find that niche retailers like Lululemon or Dollar Shave Club provide themwith an opportunity to display their sophistication or save significant amountsof money. As a result, the growth of both long-tail models and specialized nicheretailers in the age of eCommerce has led to an increasing polarization in retailbusiness models.Consumer vs. citizenMany people are now trying to satisfy a human desire to contribute to the greatercommunity when they shop. In response, companies like Toms and Warby Parkerhave woven a commitment to social responsibility into the core of their businessmodel. Toms donates a new pair of shoes to a child in need for every pairpurchased. Warby Parker follows the same model, only with eyeglasses.Permanent vs. occasional retailWork pressures due to a challenging job market, along with a variety of relatedtime constraints means that consumers are demanding an increasing amount ofconvenience when they shop. One of the biggest attractions of online retail is analways open, 24/7 shopping environment. While convenient, eCommerce can alsodecrease the urgency of purchase. ⊲1 2 3 4 5 6 7
  • 8. Business Models Trend Report | December 2012One response to this challenge is the creation of retail scarcity and noveltythrough location and product stock. This approach acknowledges that manyconsumers gain social status and pleasure from owning “limited edition” items.This helps to explain the continued popularity of pop-up shops that remain in atemporary location anywhere from a few hours to a few weeks. Some stores,including Toronto’s Dough by Rachelle (Liu, 2012) and The Doughnut Vault inChicago (2012), are taking this idea further, staying open only as long as theyhave inventory to sell.Hyper-local vs. mega-globalDue to the popularity of farmer’s markets and a newfound focus on the meritsof buying local, consumers have become more aware of the distance foodtravels to reach their plate. Recent developments have also sparked similarconversations about local versus global retail.In the Canadian retail landscape, new entrants such as Marshalls, Nordstromand Target serve as a reminder of the global reach of retailers. At the sametime, Toronto-based website Shopcaster curates products from local indiestores that do not consider eCommerce to be their core strength. Meanwhile,recent entrant Shop.ca aims to combat the growing dissatisfaction felt byCanadian online shoppers when faced with high shipping costs and dutycharges from American retailers (Silcoff, 2012). ■ 8 Forward Thinking What new retail opportunities might emerge as a result of conflicting tensions in consumer attitudes and behaviours? How might you showcase specific products while also offering customers a wide array of options? What values and beliefs does your brand hold true? How might you incorporate sustainability and social responsibility practices into your business model? How might you cater to both convenience-seeking customers and those looking for unique products and experiences with exclusivity? What actions are you taking to make localization a part of your national or international retail strategies?1 2 3 4 5 6 8
  • 9. Business Models Trend Report | December 2012 2eCommerce converges withbricks-and-mortar (and vice-versa)Consumers have always formed their understanding of brands through aculmination of interactions and experiences. They expect consistency acrosstouchpoints, despite the proliferation of channels in recent years.The result is that after amassing more than a century of retail expertisefollowing the emergence of the department store, many traditional bricks andmortar retailers have had to add an online component. While the goal is to offercustomers a seamless omni-channel experience, a smooth transition from bricksto clicks has been difficult for all but a handful of retailers.New and improved in-store retailDespite the numerous challenges facing traditionalretailers, having a physical location still provides manyadvantages. As Jerry Storch, Chairman and CEO of Toys‘R’ Us argued during Shop.org’s annual summit, “Whilethere has been much focus on online-only shopping– and our own e-commerce sites have grown to a $1billion business – the reality is that the vast majority ofsales still occur in physical stores.”The trick has been finding the best way of combiningeCommerce with in-store to create a connected retailexperience. The first step is rethinking multiple pools ofinventory for each channel (e.g. in-store, online, etc.) andinstead shifting towards centralized or fluid inventory.Such a shift allows retailers to ship products betweenstores to meet customer demand, or provide “endlessaisle” options through the use of in-store technologies.It also means giving customers the option to buy onlineand pick-up in-store (B.O.P .I.S.) or buy online and returnin store (B.O.R.I.S.). In doing so, previously separate Retail channel and departmentsupply chains are now merging in order to help retailers integration matrixlower their costs. These and other related omni-channeltactics were discussed in our previous trend report onMarketing and Merchandising. ⊲1 2 3 4 5 6 9
  • 10. Business Models Trend Report | December 2012 Supporting B.O.P.I.S. and B.O.R.I.S. through fluid inventoryA recent study from CrossView demonstrates that B.O.P .I.S. and B.O.R.I.S. provideopportunities for retailers to demonstrate superior approaches to customer servicethat are not possible with pureplay eCommerce (McCue, 2012). This explainswhy some retailers, are using drop shipping (consumers buy online, but productsare shipped direct from the vendor to the purchaser). This allows for enhancedselection and helps companies shift their warehousing and inventory costs tofunding programs that improve the customer relationship. This strategy is notwithout risks, however, as it adds complexity into the value chain through a needto coordinate multiple organizations (both retailer and vendor).Meanwhile, some bricks and mortar retailers are also trying to enhance their in-store experiences, such as lululemon offering free weekly yoga classes in storesand showrooms (lululemon athletica, 2012) and Reebok opening a gym in its NewYork store (Pinter, 2012).Making clicks more like bricksWhile pureplay eCommerce offers many advantages, consumers are still hesitant “Managing customer service into fully embrace online shopping in categories where being able to touch or eCommerce is a totally differenttry on an item prior to purchase is considered central to the experience. But job than managing customernew options have emerged to help close the gap between online and in-storeexperiences, including virtual fitting tools like Fits.me (2012). After taking a few service in bricks and mortar.basic measurements, Fits.me will display garments on a representative version of There are different skillsetsthe customer called a “FitBot. ” and rules and you have to understand what excellenceNew and nimble online retailers will continue to experiment with fresh approachesto retail, thanks to business models that have been built from the ground up. But means in each channel.”for all their cutting edge approaches, certain online retailers are now realizing that – Dr. Donna SmitheCommerce has limits and are starting to contemplate the previously unthinkable – Professor in the Ted Rogers School of Retail Management, Ryerson Universitya move into physical retail. ⊲1 2 3 4 5 6 10
  • 11. Business Models Trend Report | December 2012Convergent retail made simple “We really believe in theEmerging technology solutions are making it easier for smaller retailers to offer integration of online and offline.convergent retail solutions through platforms such as LightSpeed. LightSpeed That’s why we offer the freeintegrates front-counter Point-of-Sale with eCommerce and also offers interactivesales tools via the iPad and mobile solutions (LightSpeed Retail Inc., 2012). In monthly home trial – because wea recent Reuters article about the 2012 holiday shopping season, HSN Chief know that some guys need moreExecutive Mindy Grossman noted that, “I still see people looking at their than pictures. They need to touche-commerce strategy and saying mobile comes later. Actually, it should be the and feel and try on the clothing.”opposite. (Bhattacharjee, 2012). ” – Hicham Ratnani CFO of Frank & OakShopify, meanwhile, makes the process of creating and managing a small onlinestorefront as simple and seamless as possible, thanks in part to a recent shippingpartnership with Canada Post (Bury, 2012). The growth of convergent retailplatforms such as LightSpeed and Shopify now allow smaller retailers to focus onother aspects of their omni-channel retail strategy, such as findability (the easein which customers can actively seek out an a retailer’s website), conversion (theactivities designed to convert shoppers into buyers) and transactions (the ease inwhich customers can pay for goods and services). ■ 8 Forward Thinking Are you ready for a world in which the distinction between online and offline channels no longer exists? Is your team ready to build seamlessness into online and offline, along with all the channels through which you deliver experiences?1 2 3 4 5 6 11
  • 12. Business Models Trend Report | December 2012 3Vertical integration makesa comebackVertical integration is by no means a new business model – Ikea, Sony andDanier have spent decades bringing their manufacturing and retail operationsin sync. Lately however, certain retail sectors have rediscovered verticalintegration because it can offer a distinct competitive advantage whencombined with other retail strategies. For Zara, vertical integration was crucialin creating a fast fashion business model that allows stores around the globe tostock new clothing twice a week.Manufacturers set up shopCompanies that began as manufacturers are nowmorphing and extending themselves into the retailspace. These include Apple (who started opening retaillocations in 2001), and Lego, who has spent the pastfew years updating and expanding their retail presence(Wikipedia, 2012a). The move from making to sellingrequires moving away from drop shipping and shiftinginto customer experience and service, which usuallyrequires outside expertise and significant investments.Moving into retail does allow the manufacturer tobetter align the brand promise with the customerexperience and offer a complete assortment ofproducts. This approach also increases profits, sincethe manufacturer no longer has to provide a discountto another retailer in order to carry their products.Conversely, retailers that do not produce their ownproducts are finding that vertical integration can turnformer partners into competitors. ⊲ Vertical integration reduces the distance between manufacturer and customer1 2 3 4 5 6 12
  • 13. Business Models Trend Report | December 2012Think vertical from day oneSome of the most recent innovative retail brands have embraced verticalintegration from the start. These include Warby Parker, Frank & Oak andShoedazzle. As venture capitalist Boris Wertz recently argued in TechCrunch, “Byeliminating stores from the supply chain, these companies bring products directlyto consumers from the factory without the bloat of the traditional retailer. Thistranslates into high-quality products … at significantly lower prices. (2012). ”In some ways, vertical integration is the ultimate expression of a privatelabel approach to retail. (For more thoughts on private labels and the rise ofSophisticated Frugality, see our previous trend report on Marketingand Merchandising.)Fulfillment beckonsAnother example of vertical integration can be seen in the launch of AmazonLockers. These lockers serve as a convenient way for customers to receive andpick up shipments from self-serve stations, allowing Amazon to compete with theimmediacy of bricks and mortar (Manjoo, 2012). In the future, vertical integrationmight mean eliminating the retail experience altogether, thanks to 3D printingmarketplaces such as Shapeways (Shapeways Inc., 2012). ■ 8 Forward Thinking How are you approaching fulfillment, an often overlooked part of a vertical integration strategy, especially for eCommerce retailers? How might you extend merchandising into a new realm of product design and manufacturing? What is the role of eCommerce in a vertically integrated company?1 2 3 4 5 6 13
  • 14. Business Models Trend Report | December 2012 4Affiliate marketing has its momentAffiliate marketing was popularized thanks to Amazon’s widespread adoption of the “Affiliate programs are reallytechnique in 1996 (Wikipedia, 2012b). Amazon helped drive book sales and improve great for getting better reachits online reach by paying a commission to websites willing to embed custom across the Internet.”widgets or otherwise link to specific books on their site. – Sameera BandukMore recently, new business models have emerged that prioritize affiliate Marketing Manager, Well.camarketing, as this approach provides a fixed cost per new customer acquisition,among other advantages. Large-scale networks such as Commission Junction havealso made it easier for retailers to quickly plug into a large and extensive database “When a customer is doingof relevant affiliates (Commission Junction Inc., 2012). research on a product shopping engine, and you’re not there,The second wave of affiliate retail that’s a core business issue. I thinkDespite lower prices and increased convenience, convincing consumers to shop affiliate marketing will continueonline can still require a shift in habits and mindset, especially in Canada, where to be a important part of runningeCommerce adoption has been slower (eMarketer, 2012). Affiliate marketing can an eCommerce business.”help with this shift, which explains why newer online retailers such as Ebates – Sarah Trimble(Ebates Performance Marketing Inc., 2012), Upromise (Upromise Inc., 2012) and Associate VP Interactive Marketing ,RedFlagDeals.com (2012) have built their business around affiliate marketing. & Community, Sears CanadaSkimlinks (Skimbit Ltd., 2012) provides another approach, providing bloggerswith an automated affiliate process by searching for keywords in blog posts andproviding links to the products and services mentioned. As consumers spendincreasing amounts of time online, it’s important for retailers to appear on thesites that their customers are already using. This is especially true of sites wherecustomers tend to research new products. ⊲1 2 3 4 5 6 14
  • 15. Business Models Trend Report | December 2012Affiliate relationshipsA successful affiliate marketing program requires a series of strong, personalpartnerships between retailers and affiliates. In order to better incentivize andcustomize their affiliate program, Canadian health and beauty eCommerceretailer Well.ca built an entirely new platform to manage their relationships withbloggers and deal sites (Banduk, 2012). This platform provides more control,access to real-time info, and helps Well.ca offer more personalized and creativepromotions to their affiliate network. Affiliate Reverse AffiliateReverse affiliateAlong with bringing affiliate marketing to prominence, Amazon has alsodeveloped a reverse affiliate program through their Marketplace. In this case,retailers pay Amazon a commission to list their products alongside the restof the website’s comprehensive product assortment. Sears.com also offers arelated service (Sears Brands LLC, 2012). As with traditional affiliate marketing,the goal is to gain access to a wider audience. For Amazon or Sears, a reverseaffiliate model provides another way to increase site monetization by sellingaccess to their already sizeable customer base. ⊲1 2 3 4 5 6 15
  • 16. Business Models Trend Report | December 2012Social commissionAlong with traditional approaches to affiliate marketing are sites that employvarious forms of social commission. These include China’s Vancl Star (Daohen,2011), sneakpeeq (2012) and Lockerz (2012), which was mentioned in our previoustrend report on Marketing and Merchandising. In exchange for promoting specificproducts or services through social media, ordinary consumers earn points thatcan be exchanged for discounts or cash. ■ 8 Forward Thinking Are you able to provide affiliates with unique and exclusive offers on an ongoing basis to keep customers (and affiliates) interested? Have you considered integrating your affiliate marketing strategy with popular loyalty programs like AIR MILES?1 2 3 4 5 6 16
  • 17. Business Models Trend Report | December 2012 5Paying for usage Mini Trend: Our research uncovered four significant trends in retail business models, along with a handful of smaller trends that do not yet warrant a full description. However, we believe that both of the following mini trends merit inclusion in this report given their rapid uptake and popularity.Since Ford launched the Model T car in 1908, owning a vehicle has becomeone of the most visible status symbols for North Americans. But as GenerationY (Millennials) continues to face serious economic pressures, buying a car haslost its luster. As Josh Allan Dykstra argues in a July 2012 Fast Company article,a number of factors, including the popularity of cloud-based music services andalternate forms of transportation in urban centres, are helping to shape a newapproach to ownership. Rachel Botsman and Roo Rogers provide a more detailedexploration of the evolution of ownership in their 2010 book What’s Mine Is Yours:The Rise of Collaborative Consumption.Zipcar, zipdress, zipbag, ziproomThis new paying for usage mentality helps explain the growth and popularityof Zipcar and other car sharing options. But the idea of short-term rentals isno longer limited to expensive items such as cars. It’s now possible to rentdresses (rentfrockrepeat.com), handbags (BagBorroworSteal.com), children’s toys(babyplays.com) and apartments (Airbnb.com). 8 Forward Thinking Want to gain access to the private habits of influential customers? Be prepared to openly barter for this information.1 2 3 4 5 6 17
  • 18. Business Models Trend Report | December 2012 6Please subscribe Mini Trend: Our research uncovered four significant trends in retail business models, along with a handful of smaller trends that do not yet warrant a full description. However, we believe that both of the following mini trends merit inclusion in this report given their rapid uptake and popularity.In order to provide consumers with a reliable and convenient way to receive staple “We realized that younggoods, a number of new automated subscription services have emerged. The men now spend $50-$150business model for subscription retail is relatively straightforward, but has been per month on clothing ortweaked in order to make it easy to return unwanted items. accessories, instead of $500 twice a year. It’s similar toCheese, wine and underwear of the month how these men consumeA wide variety of retail items are now available through automated subscriptions, information. They use Twitterincluding cheese (Monforte Dairy Company, 2012), men’s clothing (Frank & Oak,2012), women’s shoes (ShoeDazzle.com Inc., 2012), household products (Alice. and Facebook and blogscom, 2012), cosmetics (Topbox.ca, 2012), diapers (IncrediBundles.com LLC, instead of reading a gigantic2012), wine (Zagat Wine, 2012) and digital books (24symbols, 2012). Walmart book every six months.”Labs recently launched the Goodies Co. (Walmart Stores Inc., 2012), a monthly – Hicham Ratnanisubscription service that delivers an inexpensive box of sample-sized servings of CFO of Frank & Oakartisanal food products. The goal of the service is to encourage customers to orderfull-sized versions of their favourite new products.Subscription services tend to improve customer retention rates and provide apredictable source of income, as customers often create standing orders for staplegoods. There is, however, additional pressure on subscription retailers to ensure asufficient amount of relevance and novelty when including new items in order tomaintain customer satisfaction and loyalty over time. 8 Forward Thinking How will you keep customers engaged once the initial novelty of subscribing wears off?1 2 3 4 5 6 18
  • 19. Business Models Trend Report | December 2012What’s NextOur next report will look at retail trends through the lens of emerging valueexchange, followed by analytics, and technology platforms. Once these trend Steps of strategic foresightreports are complete, we will move to the next phase of strategic foresight:identifying the driving forces underlying the trends. Those driving forces will 1 Trend scaninform future scenarios, leading to the last phases in this strategic foresight Marketing and Merchandisinginitiative to articulate the future of B2C retail and commerce. Business ModelsFor more information, you can follow the project on Nurun’s blog,Digital for Real Life. If you have any questions, or want to receive an Value Exchangeemail reminder when our next trend report is published, please contact Analyticsfutureofretail@nurun.com. Emerging Technology PlatformsCorrection 2 Identify trend driversIn our previous retail trend report on Marketing & Merchandising, Nurundescribed Krush as a retailer, when it is in fact a social discovery andrecommendation site. We apologize for this inaccuracy. 3 Evaluate critical uncertainties 4 Future scenarios 5 Strategic implications Preparing for the Future of Retail: A Strategic Foresight Report 6 Action plan 7 Monitor trends 19
  • 20. Business Models Trend Report | December 2012MethodologyNurun’s strategic foresight team performed a horizon scan using the “STEEPV”framework to locate current and emerging trends and signals in the followingareas: Social, Technological, Economic, Environmental, Political, and Cultural Values.These signals and trends were then clustered and sorted into six overarchingtrends. Each of these overarching trends required the support of three to fivestrong signals or examples. Some trends had an excess of signals – in thosecases, excess signals were catalogued for future inclusion or consideration.Sincere thanks to the business model experts who graciously shared their insightswith us for this report: Sameera Banduk Marketing Manager at Well.ca Sameera is a key member of the Well.ca team that brought the first Virtual QR Code Store to North America in April 2012. Sameera is also an organizer of Ecommerce Camp Toronto events and believes that the opportunity for the growth of eCommerce in Canada is virtually endless. Katherine Hague CEO/Co-founder of ShopLocket Katherine is a graduate of the Schulich B.B.A. program and ran her own marketing consultancy throughout university where she worked with companies ranging from the Fortune 500 to startups. Prior to co-founding ShopLocket she was the Marketing Manager for Toronto-based energy solution company ecobee.com and one of the first Shopify Theme developers. You can find Katherine online at katherinehague.com. Hicham Ratnani CFO of Frank & Oak Hicham has a background in engineering and worked for several years as a strategy consultant at Deloitte before co-founding Frank & Oak in 2012. As the company’s CFO, Hicham manages the technology and finance team, and was named one of Montreal’s Top 25 Emerging Entrepreneurs at the 2012 international C2 (Commerce + Creativity) Conference. ⊲ 20
  • 21. Business Models Trend Report | December 2012 Dr. Donna Smith Professor in the Ted Rogers School of Retail Management, Ryerson University Donna’s current research examines the influence of family business on retailer- vendor strategic partnerships. In September 2010 she won the Best Paper Award in the Doctoral Colloquium at the International Colloquium in Relationship Marketing in Henley-on-Thames, England. Donna was President of the American Collegiate Retailing Association (2006-2008), a global network of university professors who teach and conduct research in retailing. Sarah Trimble Associate VP, Interactive Marketing & Community, Sears Canada Sarah has been in marketing for over 10 years. Her marketing experience has covered both traditional and digital media, with roles at a major multi-national book publisher along with Indigo and Sears Canada. In her current role, Sarah is responsible for the strategy, optimization and management of all digital marketing programs at Sears Canada, including the affiliate program. Sarah recently finished her Executive MBA at the Richard Ivey School of Business.The Nurun foresight team will continue to monitor and collect new developmentsin business models to inform subsequent strategic foresight work, especiallyscenario development. ■ 21
  • 22. Business Models Trend Report | December 2012Sources24symbols. (2012). 24symbols. Retrieved November 26, Huhman, H. R. (2012, April 5). JOBS Act To Jumpstart The Job 2012, from http://www.24symbols.com/en/ Market. Forbes. Retrieved from http://www.forbes.com/ sites/work-in-progress/2012/04/05/jobs-act-to-jumpstart-Alice.com. (2012). Alice.com. Retrieved November 26, 2012, the-job-market/ from https://www.alice.com/autodelivery IncrediBundles.com LLC. (2012). Diaper Bundles ::Auto Rental News. (2012, January 11). Legislation OKs IncrediBundles.com. Retrieved November 26, 2012, from Peer-to-Peer Car Sharing in Oregon - Fleet Insurance. http://www.incredibundles.com/diaper-bundles/ Retrieved from http://www.autorentalnews.com/Channel/ Fleet-Insurance/News/Story/2012/01/Peer-to-Peer-Car- Internet Retailer. (2012). Top 500 Guide. The Top 500 List - Sharing-Now-Legal-in-Oregon.aspx Internet Retailer. Retrieved November 26, 2012, from http://www.internetretailer.com/top500/list/Banduk, S. (2012, November 6). Interview with Sameera Banduk from Well.ca. Kalanda, R. (2012, March 31). Does Amazon’s “One- Click” Success Mean Business Method Patents forBhattacharjee, N. (2012, September 18). Walletless shopping All? E-Commerce News. Retrieved from http://www. still a dream this holiday. Reuters. Retrieved from http:// ecommercetimes.com/story/74719.html www.reuters.com/article/2012/09/18/us-retail-summit- mobile-idUSBRE88G0Z020120918 LightSpeed Retail Inc. (2012). LightSpeed Retail Point of Sale (POS). Retrieved November 26, 2012, from http://www.Bury, E. (2012, October 5). Shopify Partners with Canada lightspeedretail.com/ Post to Turn Brick-and-Mortar Into Brick-and-Click. BetaKit. Retrieved from http://betakit.com/2012/10/05/shopify- Liu, K. (2012, June 14). The Beast is selling back-alley donuts. partners-with-canada-post-to-turn-brick-and-mortar-into- The Grid TO. Retrieved from http://www.thegridto.com/ brick-and-click life/food-drink/the-beast-is-selling-back-alley-donuts/Chen, T. (2012, August 7). Small Business And Internet Sales Lockerz. (2012). Top Finds From Friends & Celebrities | Tax. Forbes. Retrieved from http://www.forbes.com/sites/ Lockerz. Retrieved September 11, 2012, from http:// moneybuilder/2012/08/07/small-business-and-internet- lockerz.com/ sales-tax/ Lululemon athletica. (2012). complimentary yoga classesCommission Junction Inc. (2012). CJ - Your Performance | the gift of yoga from lululemon athletica. Retrieved Marketing Partner. Retrieved November 26, 2012, from November 26, 2012, from http://www.lululemon.com/ http://www.cj.com/ community/giftofyogaEbates Performance Marketing Inc. (2012). Coupons, Promo Manjoo, F (2012, July 11). Amazon same-day delivery: How . Codes and Cash Back Savings - Ebates.com. Retrieved the e-commerce giant will destroy local retail. Slate November 26, 2012, from http://www.ebates.com/ Magazine. Retrieved from http://www.slate.com/articles/ business/small_business/2012/07/amazon_same_day_eMarketer. (2012, October 19). Retailers in Canada delivery_how_the_e_commerce_giant_will_destroy_ Make Strides in the Ecommerce Channel. Retrieved local_retail_.single.html November 26, 2012, from http://www.emarketer.com/ (S(yfpqyw55tpu1ag45nnu4gdjl))/Article.aspx?R=1009427 McCue, T. (2012, July 31). Best Ways to Combat Showrooming Trend. Forbes. Retrieved from http://www.Fits.me. (2012). Fits.me | Virtual Fitting Room. Retrieved forbes.com/sites/tjmccue/2012/07/31/best-ways-to- November 26, 2012, from http://fits.me/ combat-showrooming-trend/Frank & Oak. (2012). Welcome | Frank & Oak. Retrieved Monforte Dairy Company. (2012). Monforte Subscription November 26, 2012, from http://www.frankandoak.com/ Offering. Retrieved November 26, 2012, from http://www.Huang, D. (2011, March 25). Vancl tries out e-commerce 2.0 : monfortedairy.com/monforte-subscription-offering.html BeijingToday. Retrieved November 26, 2012, from http:// Pinter, D. (2012, August 22). Reebok Opens Fitness Focused www.beijingtoday.com.cn/business/vancl-tries-out-e- Retail Store And Gym In NYC [Pics]. Retrieved November commerce-2-0 26, 2012, from http://www.psfk.com/2012/08/reebok- opens-fitness-focused-retail-store-and-gym-in-nyc-pics. html 22
  • 23. Business Models Trend Report | December 2012RedFlagDeals.com. (2012). Canadian Store Deals, Coupons, Wertz, B. (2012, September 29). The Next Big E-Commerce and Sale Promotions - RedFlagDeals.com. Retrieved Wave: Vertically Integrated Commerce. TechCrunch. November 26, 2012, from http://www.redflagdeals.com/ Retrieved from http://techcrunch.com/2012/09/29/ the-next-big-e-commerce-wave-vertically-integrated-Sears Brands, LLC. (2012). Seller Portal - Account Selector. commerce/ Retrieved November 26, 2012, from https://seller. marketplace.sears.com/SellerPortal/d/switch_account.jsp Wikipedia. (2012b November 21). Affiliate marketing - Wikipedia, the free encyclopedia. Retrieved NovemberShapeways Inc. (2012). Shapeways - Make & Share Your 26, 2012, from http://en.wikipedia.org/wiki/Affiliate_ Products with 3D Printing. Retrieved November 26, 2012, marketing from http://www.shapeways.com/ Wikipedia. (2012a November 26). Lego - Wikipedia, the freeShoeDazzle.com Inc. (2012). Women’s Shoes, Handbags and encyclopedia. Retrieved November 26, 2012, from http:// Jewelry - ShoeDazzle: Your Personal Stylist | ShoeDazzle. en.wikipedia.org/wiki/Lego com. Retrieved November 26, 2012, from http://www. shoedazzle.com/ Yglesias, M. (2012, June 5). Is Airbnb illegal? Why hotels are so upset about you renting a bedroom to a stranger. SlateSilcoff, S. (2012, June 18). What keeps online retail in Canada Magazine. Retrieved from http://www.slate.com/articles/ from clicking? The Globe and Mail. Toronto. Retrieved business/moneybox/2012/06/is_airbnb_illegal_why_ from http://www.theglobeandmail.com/report-on- hotels_are_so_upset_about_you_renting_a_bedroom_ business/what-keeps-online-retail-in-canada-from-clicking/ to_a_stranger_.html article4178807/ Zagat Wine. (2012). The Zagat Wine Club | Zagat Wine.Skimbit Ltd. (2012). Skimlinks | Affiliate marketing made easy Retrieved November 26, 2012, from http://www. - content monetization | Skimlinks. Retrieved November zagatwine.com/jsp/offer/wineclub/us/zag/wine_club.jsp 26, 2012, from http://skimlinks.com/sneakpeeq. (2012). sneakpeeq | Style, Home and Gourmet Food Discoveries You’ll Love. Retrieved November 26, 2012, from http://www.sneakpeeq.com/Spuhler, B. K. (2011, September 30). Compliance with California Transparency in Supply Chains Act of 2010. Corporate Compliance Insights. Retrieved from http:// www.corporatecomplianceinsights.com/preparing-for- compliance-with-the-california-transparency-in-supply- chains-act-of-2010/The Doughnut Vault. (2012). The Doughnut Vault. Retrieved November 26, 2012, from http://thedoughnutvault.tumblr. com/Topbox.ca. (2012). TOPBOX | Luxe beauty samples delivered to you in a beautiful box each month. Retrieved November 26, 2012, from http://topbox.ca/Upromise Inc. (2012). Upromise by SallieMae. Retrieved November 26, 2012, from http://www.upromise.com/ welcomeWalmart Stores Inc. (2012). Welcome to | Goodies.co. Retrieved November 26, 2012, from https://www. goodies.co/ 23
  • 24. Business Models Trend Report | December 2012Meet the Nurun TorontoStrategic Foresight TeamRyan BiggeAs a Digital Content Strategist at Nurun Toronto, Ryan Bigge combines over 12years of experience as a freelance journalist with a passion for design thinking andinteractive art. His writing has been published in the New York Times Magazine,Report on Business, and the Toronto Star. As part of a recent residency at the CFCMedia Lab, Ryan co-created txt2hold.ca and tweet2hold.com, two related interactiveprojects that convert digital experiences into tangible, permanent keepsakes.Jen ChowAs Nurun Toronto’s Design Research lead, Jen utilizes a diverse set of consumerresearch techniques to uncover insights and shape new opportunities for variousretail clients. Jen recently co-authored a report on the future of consumer-to-businesspayments that focused on the Canadian banking industry as part of her work inOCAD University’s Master of Design Foresight & Innovation program. Jen’s workfuses her eclectic background in accounting and finance with her keen interest insociocultural trends and technology.Kira LevineAs Senior Retail Strategist at Nurun Toronto, Kira’s focus is on translating consumerneeds into viable retail solutions, bridging both in-store and online capabilities.She brings a unique blend of passion for retail with over nine years of experiencein category and product management. She holds a Bachelor’s degree in RetailManagement and an International MBA.Audrey CarrAs Director of Digital Strategy, Audrey guides Nurun Toronto’s cross-functionalteams in identifying, framing and solving customer-centric opportunities acrossour omni-channel retail clients, including Sears Canada, The Home Depot Canada,Acklands-Grainger, and the LCBO. She also leads the development and evolutionof Nurun Toronto’s strategic capabilities in design research, design & retail strategy,analytics, and interaction design. 24
  • 25. Business Models Trend Report | December 2012About NurunNurun is the world’s largest independent full-service digital agency, providing Follow Nurun Toronto:a broad scope of services that are uniquely tuned to the opportunities and @NurunTorontochallenges faced by online and omni-channel retailers. Nurun Toronto on FacebookWith strong expertise in digital retail strategy, experience design, platformdevelopment, enterprise integration, and platform management, Nurun Toronto Nurun on LinkedIncrafts experiences that marry consumer brand engagement and digital utility forsome of Canada’s most recognized retailers, including Sears Canada, The HomeDepot Canada, Holt Renfrew, LCBO, and Walmart Canada.For Toronto new business inquiries, please contact Emily Bond, Vice President,General Manager at emily.bond@nurun.com. 25